How To Read A Preliminary Title Report

When a property changes hands, the transfer is recorded in the public records. As the home is sold over time, the prelim report will list the date of each sale as well as the names of the parties in each transaction. You want to ensure beyond a shadow of a doubt that you have a “clear” title and that the property is really for sale. If you’re wondering how to read a preliminary title report, it is important to understand that a  title report might list several different liens.

Property Taxes

When property taxes become delinquent, the local taxing authority can place a lien on the property in the amount of the past-due taxes, plus interest and penalties. Property tax liens are issued a so-called “superior” status, which means that if the property is sold, property taxes must be paid before any other existing liens.

Mortgage Liens

This is perhaps the most common form of a lien. The buyer may be listed as the owner, but the mortgage company has a legal interest in the property as well. That interest must be paid in full when the property changes hands.

Mechanic’s Liens

This is a lien formed when a contractor begins work on a home. It ensures the contractor will get paid. If the owner and the contractor get into a spat and the owner refuses to pay what’s due, the contractor will leave the lien in place.

Income Taxes

If a property owner falls behind on income taxes, a lien will appear on the title report, even if the owner makes a payment arrangement with the IRS.

Other legitimate liens include liens for an unpaid child or spousal support, or judgments filed as the result of a lawsuit.

 When you buy a foreclosed home, you could be responsible for settling any remaining liens after the lender who foreclosed on the home recoups its mortgage. This could be very, very expensive.

CC&Rs (Covenants, Conditions & Restrictions) are rules that property owners must follow if the home is part of a homeowners association (HOA). CC&Rs can limit anything from the size of a driveway to how tall you can grow the grass in your front yard. Most CC&Rs are relatively harmless but don’t take them for granted, especially if you’re buying an investment property that you want to resell or rent.

The preliminary title report exists for a reason, to make you completely aware of the current legal status of the real estate property and whether or not a sale can take place during that time. It helps you make sure there aren’t any hidden liens or encumbrances on the property.  It’s also one of the best ways to avoid surprises down the line that could harm the value of your investment.

The Val Kerr Team provides exceptional real estate services for the Hudson Valley including East Fishkill homes, Brewster properties and Hopewell Junction real estate among other surrounding neighborhoods. For more information on buying and especially selling your home, contact the team below.